XXXXXX XXXXX INCORPORATED
0000 XXXX 000 XXXXX
XXXXX, XXXX 00000
November 14, 1997
CONFIDENTIAL
Xx. Xxxxxx Xxxxxxxxxx
00 Xxxxxx'x Xxx
Xxx, Xxx Xxxxxxxxx 00000
Re: Letter of Agreement
Dear Xxxxxx:
On behalf of the Board of Directors, it is with great pleasure that I offer
you the positions of President and Chief Executive Officer of Xxxxxx Xxxxx
Incorporated ("LDII" or the "Company") and Member of the Board of Directors,
effective November 17, 1997. The following details the terms of our offer:
LDII will enter into a definitive employment agreement with you (the
"Definitive Employment Agreement") initially covering the period November 17,
1997, through December 31, 2000, and guarantee the base salary provisions of the
Definitive Employment Agreement to be entered into should at any time during the
contract period (i) there be a change of control at LDII and you leave the
Company within 60 days thereof; or (ii) should you be fired without cause.
After the initial term, the Definitive Employment Agreement will automatically
be renewed for subsequent one-year periods until such time as action is taken to
terminate it. At the Company's 1998 annual meeting, the Company will nominate
you for re-election by the Shareholders to the Board of Directors. If during
the final year of the Definitive Employment Agreement (including any extensions)
there is either (i) a change of control and you leave the Company within 60 days
thereof; or (ii) you are fired without cause, the cash portion of your parachute
shall equal one full year's base salary. In addition to the foregoing, in the
event that there is a change of control of the Company and you leave within 60
days thereof, all of the options that would vest with the passage of time during
the initial three-year period or your employment and one-half of the options
that are subject to performance standards over the same period shall immediately
vest and be exercisable. In the event that the current holders of outstanding
warrants fail to provide the Company with a minimum of $500,000, every five
weeks, beginning in November 1997, and to continue thereafter for ten payments,
or an aggregate of $5,000,000 over the 50 week period, you will have the right
to terminate your contract and receive one year's base salary, plus
reimbursement for actual reasonable expenses incurred to relocate your
residence. Until the Definitive Employment Agreement is executed by LDII and
yourself, this Letter of Agreement, once executed, shall serve in the interim as
your employment agreement.
LDII will provide you a first-year cash compensation package of $350,000
beginning January 1, 1998, comprised of a base salary of $250,000, payable in 24
equal bi-monthly payments and a guaranteed cash bonus of $100,000, payable in
four equal quarterly payments of $25,000 at the end of each calendar quarter
starting with the first quarter of 1998 employment. Employment during calendar
year 1997 shall be prorated, based on $250,000 per annum.
Your second- and third-year base salary will be $250,000 per annum, plus a
cash performance bonus of up to 50% of that amount, payable in lump sums
respectively on the first Monday in March 1999 and March 2000. The second- and
third-year cash performance incentive awards will be determined by the Board of
Directors; the performance targets will be set by the Board at least 30 days
prior to the year for which the cash performance incentives apply.
In addition to the cash compensation discussed above, LDII will provide you
with an equity package consisting of 1,000,000 options. These shall be granted
in their entirety at the lower of the common stock price of LDII at (i) the
close of market the day prior to the press release announcing your joining the
Company as CEO; (ii) the close of market the day prior to the execution of this
Letter of Agreement; or (iii) the close of business on the day of the press
release. All options shall be exercisable for a period equal to the shorter of
(i) five years from the date of vesting; or (ii) 90 days from the termination of
your employment with the Company. If any of the 500,000 options that vest on
the date of execution of the Definitive Employment Agreement and that potential
vest as of December 31, 1998, are exercised at a time at which the trading price
of the common stock is less than $7.50, the exercise price of the option for the
shares then acquired shall be changed to an amount equal to the greater of (i)
80% of the trading price; or (ii) $3.60 per share. Fifty percent of any stock
acquired at a discounted exercise price shall be subject to a limitation so that
not more than 100,000 of such shares can be sold in any 90 day period. Of the
1,000,000 options, except for those vesting immediately upon signing the
Definitive Employment Agreement, two-thirds will be performance based and one-
third will be time based and shall vest as follows: 250,000 shall vest upon
signing a Definitive Employment Agreement, and up to 250,000 each shall vest on
December 31, 1998, December 31, 1999, and December 31, 2000, subject
respectively to your continued employment with the Company through December 31,
1998, December 31, 1999, and December 31, 2000. Performance targets for earning
of performance-based options will be based on commercially reasonable standards
and at the mutual agreement of you and the Board of Directors on an annual
basis. Any performance-based options that do not vest in the designated year
and any options that have not vested at the time of the termination of your
employment shall be null and void.
LDII will pay all necessary and reasonable relocation expenses for up to
three months from the date of hire, and pay for all living expenses for
temporary living quarters and travel thereto for the same period. LDII shall
"gross-up" the relocation reimbursement to compensate for the actual tax effect
of such reimbursement. If your current permanent home is offered for sale in a
timely manner through a broker acceptable to LDII and said home is not sold
within six months, LDII shall purchase it at the median valuation given by three
valuation advisors selected by you and LDII in a manner to be specified in the
Definitive Employment Agreement.
LDII's fringe benefits include medical insurance, participation in the
Company's 401(k) plan, and normal holidays as well as three weeks of paid
vacation time per year. The specific terms of these benefits (such as precisely
what days are recognized as holidays, the degree of employee participation in
payment for medical benefits) are dictated by Company policy.
The Definitive Employment Agreement will also set forth such additional
terms as are customary and usual under the circumstances such as the exclusivity
of your services to the Company, limitations on your right to compete with the
Company, and similar matters.
Of course, your services to the Company will be at the pleasure of the
Company's Board of Directors. The Board has reviewed and approved this Letter
of Agreement. The Board will also review and approve the Definitive Employment
Agreement referred to herein and any future employment/compensation packages.
Again, it is a great pleasure to have the opportunity to invite you to join
and lead the LDII team as the Company's Chief Executive Officer. If these terms
are acceptable, please sign and return one copy of this letter.
Cordially,
Member, Board of Directors
TERMS AGREED TO AND ACCEPTED
this 14th day of November, 1997
Xxxxxx Xxxxxxxxxx
